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5 Legal Steps for Starting Your Business

Ready to take the leap into entrepreneurship? Make sure you master this checklist first.
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It's spring (at least on the calendar), and here at LegalZoom, March means it's what we call National Start-Your-Business Month.

Whether you're a current business owner or are still deciding whether to take the plunge and start a company, it's important to step back and make sure you take all the proper legal steps to ensure your dream is realized with the protection of a legal business entity--such as an LLC or corporation. Stay with us--this isn't as hard as it sounds.

Many entrepreneurs dread dealing with the legal aspects of starting and managing a business--mainly because many don't know where to start. But ignoring legal issues can lead to costly consequences down the road. To help mitigate the risk of legal headaches, here are some top tips for getting your business up and running. (Psst: They will also help you manage hurdles along the way).

1. Think through the legal aspects of your business early.

While adrenaline and excitement may be pushing you to launch your business as soon as you can, you need to take time to contemplate legal necessities from the get-go. This prevents pitfalls and ensures a timely response should legal problems arise. Common legal issues for entrepreneurs include: choice of entity, business licenses, supply and service contracts, and employee matters. It can be difficult, but try to look six to nine months ahead and identify legal issues you will need to address for your business.

2. Don't wear your heart on your sleeve.

Don't take lawsuits and threats against your business personally; make the right decision for the business--not your ego. Sometimes, even if you feel like you are right, fighting and winning a legal battle costs more than avoiding it--not only in money, but also in your time and energy. If you can't separate your emotions, turn to an advisor for objective help to see the right cost-benefit analysis.

3. Befriend someone familiar with the law.

Establish a relationship early-on with someone you can reach out to when you need help figuring out whether a legal problem is worth the time and money. This doesn't mean paying for an attorney each time you need some friendly advice; however, a good lawyer will want to build and nurture a relationship with new prospects and not charge for every call.

Also, you should consider looking into a legal plan that deals with businesses, where you can typically get a lawyer on the phone to triage issues for a flat monthly fee. A good legal plan will provide a year of valuable service for less than some attorneys cost for an hour!

4. Don't use your personal bank account.   

While there are numerous reasons to keep your personal and business finances separated, many business owners make the mistake of using their personal bank account for their business. Managing two banks accounts might seem overwhelming and inconvenient at times, but using your personal account for business impacts your legal liability. This should not be something you "get around to later"--it should be one of the first steps taken when opening your doors.

5. Get it in writing.

It's extremely important to put almost everything in writing. Whether you're negotiating a salary or redesigning your office space.  Defining and memorializing important aspects of your business relationship will be the proverbial ounce of prevention worth a pound of cure!  Agreements should be well-defined and signed by all parties involved. If you are starting your business with co-founders, get written confirmation between yourself and your partners--everyone should know their role (and ownership) in the company. While it's great to be trusting, clear contracts simplify work relationships. Ambiguous agreements (or no agreements) make for messy business arguments and can lead to future legal disputes. 

If you follow these tips, you will spend less time on legal problems and more time on what you do best--running your business.

Last updated: Mar 26, 2013

CHAS RAMPENTHAL | Columnist | General Counsel, LegalZoom

Chas Rampenthal is general counsel and vice president of product development at LegalZoom. He's also a former talk radio host (KTLK AM 1150 at Clear Channel) and an entrepreneur himself, as the founder of LegalEndeavor.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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